Challenge Met: How a Donor Gift Led to a $100 Million Scholarship Endowment

It's no secret that alumni donors love funding scholarships. It's highly personal stuff. Quite a few donors attended college thanks to a scholarship and they feel obligated to provide a similar experience for others.

Back in June of 2015, we looked at couple keen on scholarships, but this time, the news came with a twist. Albert and Nancy Nicholas's $50 million gift to their alma mater, the University of Wisconsin-Madison, was actually a challenge gift. The down payment would be used to "match, on a one-to-one basis, gifts that support undergraduate and athletic scholarships and graduate fellowships."

As previously noted, while challenge grants make good copy, the approach comes with risks. For example, under some grant structures, if the organization fails to match the funds up front, the funds will be denied. Fortunately for a select number of Wisconsin undergraduates, this wasn't the case with Albert and Nancy Nicholas' challenge grant.

The school announced that the challenge was successfully met—four months after Albert's passing at the age of 85.

Approximately 250 additional donors joined the cause, with gifts ranging from $50,000 to $1 million. Add it all up, and the gifts created a $100 million endowment for scholarships. In the short term, about $4.5 million will be available annually for student scholarships through the Nicholas Match endowment.

The school isn't wasting any time. Twenty-three students will receive a scholarship this fall from the James B. and Susan S. Patterson Undergraduate Support Fund, one of the first scholarship funds created through the Nicholas Match.

In my introductory paragraph, I mentioned that alumni donors are drawn to scholarships for intensely personal reasons. But it's more than that. As this piece illustrates, scholarships come with additional built-in advantages. Donors can see the immediate impact of their work. Outcomes are more measurable and easier to track: The recipients get degrees and then (usually) go out and lead productive lives.

And while no one can argue with these immediate benefits, I've repeatedly called attention to gathering storm clouds on the horizon. Scholarships can have an adverse long-term impact by providing universities with minimal incentives to actually reduce tuition. Yet the overriding logic among donors seems to be, "We'll cross that bridge when we come to it. For now, let's just give kids some relief."

And you know what? I can't blame them, especially when you consider the context that frames the gift. Which brings me to the Wisconsin university system's precarious financial state. Last year, Governor Scott Walker's budget called for $250 million in cuts to the UW System while freezing undergraduate tuition—yep, that's not a typo—and providing system employees raises for the next two years.

In December, the board of regents came up with a plan that would raise out-of-state and graduate tuition rates again to offset Gov. Walker's dictates. That school wants to raise nonresident undergraduate tuition by $4,000 to $35,523 for the 2018-2019 academic year and raise tuition for a master’s degree in global real estate by $11,116, to $43,280 by 2018-2019.

The UW-Madison increases alone would generate $13.7 million annually, according to a memo system officials sent to the regents.